Notice of errata to declaration in support of memorandum in suport of motion for new trial by Anthony Wilson

1 2 3 4 5 6 7 8

Mark J. Warfel #197874 LAW OFFICES OF MARK J. WARFEL 234 East Foothill Blvd. Arcadia, CA 91006-2508 (626) 301-9327 FAX (626) 609-0413 Mwarfel@gmail.com Attorneys for Defendants and cross-complainants, TARGET MORTGAGE, INC. and NILDA ANN MARIE MEG SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO

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CASE: 37-2016-00003885-CU-FR-CTL JOHN SCOFIELD HAGE and BONNIE GRACE HAGE, individually and as TRUSTEES OF THE J. SCOFIELD AND BONNIE GRACE FAMILY TRUST and Co-Managers of SB 32nd STREET APARTMENTS, LLC, a California Limited Liability Company,

) ) ) ) ) ) ) ) ) ) Plaintiffs, ) ) vs. ) ) GOTMORTGAGE.COM, a ) California corporation; JAMES ) M. OSBORN, Jr., an individual; ) TARGET MORTGAGE, INC., a ) California corporation; ANDREA ) HAEWON PARK, an individual; ) THOMAS IPING LO, an ) individual; NILDA ANN MARIE ) MEG, an individual, et al. ) ) Defendants. ) ___________________________) and related cross-actions. )

NOTICE OF ERRATA TO DECLARATION OF MARK WARFEL IN SUPPORT OF TARGET MORTGAGE, INC., AND NILDA MEG’S MOTION FOR NEW TRIAL [NOTICE; MEMORANDUM OF POINTS AND AUTHORITIES FILED SEPARATELY] [C.C.P. § 657 ET SEQ.; § 662] DATE: TIME: DEPT:

OCTOBER 20, 2017 8:30 AM C-73

LAST TRIAL DATE: JUNE 29, 2017 DATE OF VERDICT: AUGUST 29, 2017 [HON. JOEL R. WOHLFIEL]

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1 ERRATA TO DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

1 2

I, MARK WARFEL, declare: 1.

I am an attorney duly licensed to practice law before all courts of the State

of California. My law firm, Law Offices of Mark J. Warfel, is counsel for the moving

parties, Target Mortgage, Inc., and Nilda Meg, in this action. The following facts are

within my personal knowledge and, if called as a witness herein, I can and will

competently testify thereto. This declaration is submitted in support of defendants’

motion, pursuant to Code of Civil Procedure, section 657, et seq., for a new trial and an

order vacating the Judgment rendered on August 29, 2017, and for a new and further

trial on the issue of (1) damages and (2) the affirmative defense of consent.

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The Declaration filed on September 18, 2017, inadvertently omitted two

exhibits, which are attached to this notice of errata. 3.

Exhibit 23 is the relevant pages of the Reporter’s Transcript of

Proceedings of June 14, 2017, consisting of portions of the cross-examination of John

Hage. Virtually the entire examination is relevant, and those portions have been

electronically underlined.

Exhibit 24 is the relevant pages of the Reporter’s Transcript of

Proceedings of June 12, 2017, consisting of portions of the cross-examination of Joffrey

Long. The entire cross-examination is relevant to the issues raised in the motion.

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Please add these exhibits to those attached to my declaration filed

September 18, 2017. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed September 14, 2017, at Arcadia, California.

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__________________________

MARK J. WARFEL

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1 NOTICE OF ERRATA TO DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

EXHIBIT 23

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SAN DIEGO, CENTRAL DIVISION

DEPARTMENT C-73

BEFORE HON. JOEL R. WOHLFEIL

JOHN SCOFIELD HAGE; and BONNIE GRACE HAGE,

) ) ) PLAINTIFFS, ) ) VS. )NO. 37-2016-00003885) CU-FR-CTL ) GOTMORTGATE.COM, a California ) corporation; JAMES M. OSBORN, JR. ) an individual; TARGET MORTGAGE, ) INC., a California corporation; ) ANDREA HAEWON PARK, an individual;) THOMAS IPING LO, an individual, ) and DOES 1-25, inclusive, ) ) __________DEFENDANTS. ) ) AND RELATED CROSS-CLAIMS. ) __________________________________)

EXCERPT TRANSCRIPT OF PROCEEDINGS CROSS-EXAMINATION OF JOHN SCOFIELD HAGE JUNE 14, 2017

DIANE DELANEY-DAUPHINE, CSR 3612 COURT-APPROVED COURT REPORTER

APPEARANCES: FOR THE PLAINTIFFS: HIGGS, FLETCHER & MACK, LLP BY: PHILLIP C. SAMOURIS, ESQ. 401 WEST A STREET SUITE 2600 SAN DIEGO, CALIFORNIA 92101 619-236-1551 SAMOURIS@HIGGSLAW.COM FOR THE DEFENDANTS: LAW OFFICES OF MARK J. WARFEL. BY: MARK J. WARFEL, ESQ. 234 E. FOOTHILL BOULEVARD ARCADIA, CALIFORNIA 91006 626-301-4440 MWARFEL@GMAIL.COM

INDEX - HAGE VS. GOTMORTGATE.COM, ET AL. JUNE 14, 2017 WITNESS

JOHN SCOFIELD HAGE Cross-Examination by Mr. Warfel

SAN DIEGO, CALIFORNIA, WEDNESDAY, JUNE 14, 2017, 3:16 PM

THE COURT:

Okay.

Now, are there any other

witnesses that need to be accommodated before the

defense begins your cross-examination of Mr. Hage?

MR. WARFEL:

No, Your Honor.

MR. SAMOURIS:

THE COURT:

No Your Honor.

All right.

Mr. Hage, may I ask

that you follow the directions of my deputy and retake

the witness stand, please.

THE WITNESS:

THE COURT:

Give me one moment. Sure.

All right.

Counsel, whenever

you're ready, please.

MR. WARFEL:

Thank you.

14 15

JOHN SCOFIELD HAGE,

having been previously duly administered an oath,

testified further as follows:

18 19 20 21

CROSS-EXAMINATION BY MR. WARFEL: Q.

22 23

Good afternoon, Mr. Hage.

We've met before.

Have you read all of the deposition and trial testimony of Mr. Osborn?

Yes.

And did you find him to be a credible witness?

Yes, I did.

And do you believe that he told the truth in all

of his testimony?

Yes, he did.

And was he telling the truth in the testimony

that was played the other day where he testified he

promised you $100,000 if you would take the Savoy loan

with Gotmortgage to purchase Savoy?

6 7

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Misstates

testimony.

Objection.

Overruled. I don't recall that statement.

BY MR. WARFEL: Q.

Well, let me ask it a different way.

Did you

strongly object to the terms of the Savoy loan to

Mr. Osborn prior to accepting the purchase loan for

Savoy?

I was surprised at the interest rate and the

terms of the financing when it was initially presented

to me.

18 19 20

As a result of your surprise, did you strongly

object to Mr. Osborn? A.

We discussed it and we talked about his plan made

sense to me.

had passed.

and we had a $35,000 deposit down that was subject to

loss.

forward with that loan so that we could proceed forward

in closing the transaction and then move on to more

reasonable financing.

We were up against the wall because time We were about ready to lose the property,

And his explanation made sense to me to go

Well, was part of his plan to give you $100,000

in rebates on future refinancings out of his commission

or out of rebates?

Yes.

And so he offered you $100,000 rebate on a loan

5 6

that hadn't been made yet if you would take this loan? A.

I don't recall if it was a $100,000 figure.

were -- we were looking at a -- PNC financing was

requiring reserves, and those reserves were dollars of

mine.

And that some of those dollars would be coming

back to me when the PNC financing went through, and a

portion of those funds would be applied to other

expenses and reduction of loan balances.

13 14

And all of that was prior to your accepting the

Savoy loan?

Yes.

And so you contemplated future refinances and

taking equity out of the properties prior to accepting

the Savoy loan?

I had to because I wasn't planning on having a

$900,000 interest only loan for three years without a

plan.

23 24 25 26

Were you concerned about the high payments that

you would be having as a result of that loan? A.

I was concerned about it, but I felt that I had

the cash flow at the time to cover that. Q.

And did you have $400,000 in the bank that you

had not used for that that you had previously been

planning to?

Yes.

Why didn't you use some of that money to pay down

3 4

the loan immediately? A.

Because his plan was for me to continue to

maintain liquidity on my balance sheet in preparation of

the PNC loan.

represent that liquidity, and we were taking money out

of Kansas Street, pulling money out on Kansas Street to

cover the down payment on the purchase bringing it down

10 11 12

That $400,000 was going to sit there and

to a $900,000 first trust deed. Q.

Based on your 38 years of banking experience, did

that make sense to you?

Yes.

And you've had quite a bit of experience

analyzing financial statements, haven't you?

Yes.

Do you know what a balance sheet is?

Yes.

That's so obvious, isn't it, that you're

extremely -- you know how to read them extremely well,

don't you?

Yes.

And you knew how to read them then?

Yes.

And you know that having money in someone else's

26 27 28

pocket doesn't help your own balance sheet, does it? A.

I'm not talking about the money that was in

somebody else's pocket.

I'm talking about the money

that was on that balance sheet which was my money which

was on deposit in U.S. Bank in one of my personal

accounts.

All right.

That was the $400,000.

And that would help you establish liquidity,

I'm talking about --

wouldn't it?

Yes.

And because -- and why is liquidity important?

It shows strength, financial strength.

Why do you need the financial strength?

Isn't it

so that the bank knows that you can afford to make the

payments if you need to?

14 15 16 17

Cash flow is what makes the monthly bank loan

payments. Q.

What is the point of having money in the bank

then if it's not cash flow?

For other emergencies, other needs.

Isn't it so that the bank knows you have a

reserve of money that you can draw on for any unexpected

expenses and still be able to make the loan payments?

Of course.

That's just what I said --

Okay.

-- in different terms.

Okay.

So when you have money in the bank, that's

a good thing and -- because you can make -- afford to

make your loan payments; right?

I can afford -- it's more than making loan

payments.

I look at my loan payments are coming from

current cash flow, not from coming from my balance

sheet.

Now --

That's the way I analyze the financial statement.

Understood.

7 8 9 10 11

How many bank accounts have you

opened in your career? A.

After 50 years of having bank accounts, I

couldn't even hazard a guess. Q.

Perhaps in the thousands?

Have you ever opened

up one without the signature of the bank account holder?

No.

Why did you think Mr. Osborn was going to be able

to open up a PNC Bank account in your name without your

participation?

16 17 18

I -- I had the understanding that it was at a PNC

account in my name. Q.

Right.

How could he possibly have opened up a

PNC Bank account in your name without your participation

based on your 50 years of opening bank accounts?

you ever heard of that once?

Have

No.

Did you believe that he was going to be able to

do that?

I did.

Have you ever heard of seasoning funds in the

27 28

context of obtaining loans? A.

No.

Not in -- I don't understand the question.

Well, if you're applying for a loan and you have

some money in the bank, don't lenders want to make sure

that money has been there for a little while?

they want to know the source -- the source of the funds

often?

And that

Yes.

And so if somebody put cash into an account,

wouldn't that make it less likely that the lender would

rely on the funds in that account if they couldn't trace

back those funds?

They could trace back those funds.

Well, let's talk about that.

You wrote more than

$400,000 worth of personal checks to third parties that

then cashed those checks and gave the cash to

Mr. Osborn, didn't you?

Yes.

And so how could those possibly have been traced

from the PNC Bank back to you?

With the arrangement that he had with PNC Bank.

Well, wouldn't that -- are you familiar with

lending laundering laws?

actually do that at the banks that you worked at?

23 24

Do you think that you could

I'm not sure what you're talking about money

laundering laws.

Is U.S. Bank a reputable bank?

Yes, it is.

They follow all the U.S. and California laws to

the best of their ability?

Yes.

You've had a lot of dealings with them, haven't

you?

Yes.

And what about PNC Bank, you had a loan with PNC

Bank, didn't you?

Yes, I did.

And what loan was that?

9 10 11

What property was

secured by the PNC Bank? A.

Right now I can't remember.

I think that it was

a loan on Carleton Square.

Okay.

Yes.

You had a relationship with PNC Bank.

So it was a personal residence of yours?

Do you

recall how long you had that relationship?

It was a number of years.

And did you feel comfortable with the PNC Bank

people?

Yes, I did.

Why didn't you contact PNC Bank and say I've been

told that it would be good for me to have a bank account

with money in it in your bank.

bank account so I can directly deposit funds into it?

Why didn't you do that?

Will you help me open a

This was a reserve account and -- which was

being -- money set aside for the loans that was going to

be set up.

Mr. Osborn it made sense to me.

And the way it was explained to me by I have to admit that it

started off in small dollar amounts, and the numbers

started growing, and I became concerned about that.

we were -- we were working toward an end means, and it

made sense to me to finish the plan that was set in

place.

6 7

MR. WARFEL: nonresponsive.

But

Motion to strike as

That entire response.

THE COURT:

Well, the question was why.

I think it does fall within the broad scope of why.

that objection will be overruled, and the motion to

strike denied.

12 13

MR. WARFEL: Q.

Very well.

Were you unaware that you could open up a bank

account with PNC Bank for the purpose of having

reserves?

16 17 18

Not if it was tied into a loan that was being

anticipated. Q.

What loan have you ever had any connection with

that required -- that prevented the borrower from

opening up a bank account with the lender?

time.

The loan had not been processed at that point in

Have you ever heard of a bank that is less likely

to loan money to someone because they have a bank

account with them?

No.

So then how would giving the cash to Mr. Osborn

if you could trust the third party that you wrote the

personal check to and then he's going to deposit it in

an account that you didn't have anything to do with, how

would that help PNC Bank gauge your creditworthiness?

4 5 6

Cash that was there on deposit with my name

associated to it. Q.

Well, Mr. Hage, you've been in banking for 50

years; right?

Have you ever heard of an account that's

associated with someone else without their

participation?

No.

You knew Mr. Osborn was a felon; right?

Yes.

You knew he was unlicensed, didn't you?

MR. SAMOURIS:

THE COURT:

16 17

Objection.

Vague as to time.

Sustained as to time, Counsel.

BY MR. WARFEL: Q.

After you read the newspaper article about him

that you received in February of 2014, you knew he was

unlicensed and had been convicted of financial crimes,

didn't you?

Yes.

And at that time you still thought you were

sending money to Gotmortgage; right?

Yes.

Did you still think you were sending money to

Gotmortgage when you started writing checks to Francisco

Gilles and the Newport Harbor jewelry store?

No.

1 2 3

And so when did it dawn on you that you were not

giving money to Target Mortgage for these PNC reserves? A.

We were keeping track of the funds that were

being sent to the third parties.

and we were keeping track of the reserve account.

He was cashing money,

When did it dawn on you that that money was not

going to Target Mortgage as you initially thought for

the first several months?

9 10 11 12 13 14

I believed that it was still going to Target

Mortgage. Q.

You thought all of this -- I'm sorry.

thought all this money was going to Target Mortgage? A.

It was going to -- the original address that I

was sending it to was the address of Target Mortgage.

MR. SAMOURIS:

Gotmortgage?

BY MR. WARFEL:

I'm sorry.

myself.

I meant Gotmortgage, yes.

I do the same thing myself.

22 23 24

You

Do you mean

I may have confused -- I may have misspoke Do you mean Gotmortgage?

When did you -- when did it first dawn on you that this money was not going to Gotmortgage? A.

When I drove up to meet Mr. Osborn and found that

the address that -- of Gotmortgage was different from

the address that I was sending it to.

27 28

And Mr. Osborn had previously told you I believe

you testified that you weren't giving this money to him.

It was going to Target Mortgage -- I'm sorry.

I must

have misspoke too -- going to Gotmortgage to set up the

PNC Bank account; right?

Yes.

And you'd given him over $100,000 by February

when you first learned he was a felon; correct?

Right.

But at that point you still didn't know the -- he

9 10

didn't live at the address you were sending it to him; right?

Right.

But before October you did discover that?

Yes.

And so why didn't you telephone, visit or do

something to the management of Gotmortgage to tell them

this convicted felon who's unlicensed who I've been

sending money to and I thought I was sending it to you

for a PNC loan I find out it's not even going to you?

Why didn't you say something?

I had conversations with Mr. Osborn and believed

that he was acting on behalf of my interest as far as

the financings and obtaining financing with PNC through

his brokered relationship with Gotmortgage to PNC.

And so at that point did you fully consent to the

arrangement whereby you sent him money personally to be

invested by him personally on your behalf and to manage

your finances personally rather than through

Gotmortgage?

Yes, I trusted him.

And you consented to that with full knowledge

that he was not working for Gotmortgage or anybody else?

He couldn't be because he was unlicensed and he was a

convicted felon, and he had lied to you about why he was

getting the money; isn't that right?

No, that's not totally correct.

Okay.

I had a business card from Gotmortgage.

What part of it was incorrect? I met

with him at Gotmortgage at their business, and I was --

I believed that he was through that an employee of

Gotmortgage, and he was acting on my behalf as a

mortgage broker at the time.

Gotmortgage was protecting my interests through that

organization.

I expected that

So you thought when you wrote that check to

Newport Jewelry for over $20,000 and asked Mr. Osborn to

get cash from them so he could put it in a bank account

that Gotmortgage was protecting your interests?

were relying on Gotmortgage when you wrote that check?

21 22 23 24

You

I was relying on Jimmy Osborn to be processing it

through Gotmortgage, yes. Q.

You were relying on Jimmy Osborn and the faith

you had in him, weren't you?

Yes.

Not in Gotmortgage?

I was -- I was doing it in the faith of Jimmy

Osborn who was an employee of Gotmortgage, yes.

1 2 3

Representing Gotmortgage. Q.

Well, did Gotmortgage have a business of cashing

checks for people and giving them cash?

4 5 6

MR. SAMOURIS:

Calls for speculation.

BY MR. WARFEL: Q.

To your knowledge.

THE COURT:

Well, the objection is sustained

as the question was originally framed.

again, Counsel.

10 11

MR. WARFEL: Q.

Let's start

Very well.

To your knowledge, did Gotmortgage have a

business wherein they had their clients write checks,

personal checks to unknown people who would then cash

those checks to give the money then to Gotmortgage so

they could invest it for them and reserve funds with

other banks?

Not that I know of.

Have you ever heard of anything like that in your

entire life?

No.

And you did not believe that's what was

happening, did you?

I did.

Did you ever take money directly from any

borrower in all of the loans that you brokered or

assisted with in your 38 years in banking?

No.

And why not?

Money came into the bank.

Did any of your customers ever offer to pay you

money to put their loan to the top of the stack?

No.

If they had and you had accepted it, would you

have been fired if anybody found out about that?

I wouldn't have compromised myself with that.

Because you would, in fact, be compromising

9 10

yourself if you agreed to that arrangement, wouldn't you?

Right.

Because that would be illegal and wrong; right?

MR. SAMOURIS:

THE COURT:

15 16

Calls for speculation.

Overruled.

BY MR. WARFEL: Q.

The reason it could compromise you is because it

would be something wrong?

It would either be illegal or

against all the rules of the bank; right?

Yes.

But somehow you thought that that was different

with mortgage brokers or was it lenders?

mind was the difference between all the financial

institutions you worked with for 30 years or 40 years

and this one?

What in your

I felt that he was representing other mortgage

companies and that was the relationship that he had with

PNC, and I was expecting a loan from PNC with the rate

and terms he had quoted me.

1 2

Well, did you think that the PNC loan was going

to be brokered through Gotmortgage to PNC Bank?

That's what I was expecting, yes.

So how did that impact your belief that somehow

Gotmortgage was exempt from the rules if they were going

to be the loan broker on that transaction?

7 8 9

I expected those funds would be flowing to PNC in

a reserve account for that loan. Q.

So you thought there was a reserve bank account

in your name with PNC Bank that had hundreds of

thousands of dollars in it?

Yes.

Now, you keep track of every single expense in

your household and in your businesses and in your trust;

right?

Yes.

You're fastidious about that; wouldn't that be

fair to say?

Yes.

Even FedEx receipts for the money that you sent

to Mr. Osborn you entered into your computer regularly;

correct?

Yes.

And you were keeping track of the amount of money

that you had give Mr. Osborn that supposedly was going

to the PNC Bank?

Yes.

But you decided to keep those records on a little

yellow sheet of paper inside of a bank bag that you

carried to and from the bank every time you got a

cashier's check; is that right?

Yes.

And you didn't include them in any computerized

recordkeeping, did you?

No.

Would you say that was slightly out of character

for you?

Yes.

Your whole career you've dealt with high net

worth individuals, haven't you?

Yes.

And so you're not intimidated or bashful around

bank executives, are you?

No.

You wouldn't have had any emotional reluctance to

make a telephone call to PNC Bank to check on how your

bank account was going, would you?

No.

But you never did that, did you?

No.

I relied upon my relationship with

Mr. Osborn.

You never got a bank statement, did you?

No.

You never got a 1098?

No.

Did you ask Mr. Osborn if this hundreds of

thousands of dollars were earning any interest on your

behalf?

No.

But as -- in your role as a professional trustee

for various trusts, isn't that something you would have

been well aware of, the need to keep the money working?

I felt it was working for me in this capacity.

It was working for you in this capacity, isn't

it?

Didn't you have some kind of business relationship

with Mr. Osborn where you were expecting to make a

greater return on whatever he was doing with the money

than you would have sitting in your bank account?

No.

Did you think that Target Mortgage had a duty to

warn you that Mr. Osborn was a felon?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Calls for speculation.

Overruled. I felt that Target Mortgage

had a fiduciary responsibility to me as a borrower, yes.

BY MR. WARFEL:

21 22

Did you think they had a duty to warn you that

Mr. Osborn was a felon?

Yes.

You already knew he was a felon, didn't you?

Yes, I did.

Had Nilda Meg sent you an e-mail and said, by the

way, here's an article in the newspaper that says that

Mr. Osborn was a felon; and, in fact, if she had sent

the same article that Jim Perry sent to you prior to you

getting the Target loans, would that have caused you to

not get those loans?

MR. SAMOURIS:

THE COURT:

6 7

Calls for speculation.

Sustained.

BY MR. WARFEL: Q.

What would you have done differently, if

anything, if you knew that Target Mortgage knew that

Mr. Osborn was a felon?

MR. SAMOURIS:

THE COURT:

12 13

Calls for speculation.

Sustained.

BY MR. WARFEL: Q.

When you say you are relying on them to warn you,

how can they warn you of something that you already

know?

MR. SAMOURIS:

THE COURT:

MR. WARFEL:

THE COURT: call for speculation.

22 23 24

The Court gets your point,

Counsel.

Calls for speculation.

MR. WARFEL: Q.

Okay. But, again, as framed it does Sustained. Very well.

Now, you never did apply for a loan with PNC

Bank, did you?

No.

How many loans in your career did you see funded

27 28

where nobody applied? A.

I was expecting an application before the loan

would be applied for.

and I had not gotten that application yet.

3 4

I would expect an application,

You hadn't gotten that application for almost two

years, had you?

No.

And so without even seeing an application, you

could hardly be expected to be waiting on loan

documents, could you?

9 10 11

I wasn't waiting on loan documents.

I was

waiting to make application with PNC Bank. Q.

So if Mr. Osborn testified repeatedly that you

told him you were waiting on loan docs and he was

telling you loan docs are just around the corner, would

he be lying?

No.

Loan docs would have been included in an

application prior to those loan docs.

the package.

That's part of

Well, in your experience how easy is it to

approve or guarantee someone a loan if you haven't even

seen the initial application?

I expected that he had plenty of applications to

discuss my financial conditions with a loan officer

verbally on the phone at PNC.

When you were doing loans for 38 years for

commercial loans, how often were you able to give really

sound and accurate information that someone should rely

on to the tune of $650,000 without seeing a signed

application?

I had a number of cases where people called up

and floated a scenario by me and asked if it was

something we would be interested in taking a look at.

Now, was there any reason you couldn't have made

a little phone call over to PNC Bank and said can you

please send me a 1003 so I can get started?

No.

You applied to refinance Savoy, the Savoy

9 10

property loan, five or six times during that two-year period with various lenders, didn't you?

On the Savoy loan?

Yes, sir.

I don't recall that we did.

Well, did you approach Target Mortgage regarding

the Savoy loan refinancing?

Not that I recall at this time.

Do you recall approaching Gotmortgage about

refinancing the Savoy loan?

No.

Do you recall contacting a man by the name of

Mallison about refinancing that loan?

The $900,000 loan on Savoy?

Yes.

No.

Because it wouldn't make sense to be applying for

other loans if PNC was right around the corner?

That's correct.

Because those two facts -- those two things are

entirely inconsistent, aren't they?

MR. SAMOURIS:

THE COURT:

4 5

Objection.

Argumentative.

As framed, sustained.

BY MR. WARFEL: Q.

Are you aware of any reason why you would be

applying to refinance Savoy at the same time you were

being promised that the PNC loan was going to fund

fairly soon?

9 10 11

I did not apply to refinance the $900,000 loan on

Savoy. Q.

Now, have you ever had a loan that that took more

than two months or three months to fund from application

to funding?

No.

Have you heard about any such loans?

That would

be pretty rare, wouldn't it be?

It would be.

And this one you were supposed to have it funded

by January of 2014 initially; right?

That's correct.

And so January of 2015 is an entire year.

Interest rates change quite a bit, don't they?

They do.

Did you think at the time it was reasonable to be

able to tell someone what interest rate they would get

on a loan one or two years later?

27 28

I was tracking interest rates, and interest rates

actually during that time frame were going down.

1 2 3 4 5

the interest rates would be? A.

Based upon the economy, interest rates were

either stable or reducing. Q.

6 7

And were you able to predict into the future what

I agree.

My question is slightly different.

Who can predict what interest rates are going to be a year or two from --

Nobody can.

And it would be foolish to risk $650,000 on that

prediction, wouldn't it, if someone did make such a

prediction?

I don't feel that I was taking that risk because

I was watching the interest rates and keeping abreast of

the interest rates, and Jimmy and I would discuss

interest rates constantly.

16 17

What was to be gained by waiting for PNC Bank if

interest rates were low for all banks?

I don't understand your question.

Well, I believe you testified that the PNC Bank

loan you were quoted by Mr. Osborn was in the ballpark

for the market rates at the time?

They were.

So why wait two years or more for a PNC loan when

24 25

you could apply for that loan with any bank? A.

Because I liked the idea of a PNC Bank loan.

I've had loans with PNC before, and he suggested a PNC

loan, and I went with that.

Now, today for the very first time I believe I

heard you testify that it was either PNC or Sun West.

Do you recall that testimony this morning?

Yes.

So is your testimony now today that it do could

have been either one of those two institutions that you

were being promised a loan?

Yes.

And I had financing with both PNC and Sun

West, and he gave me a choice, and I said that I would

just assume do it with PNC.

Now, let's talk a little bit about the 2015 time

period, about the time that you were going to list your

property for sale.

on your loans?

Had you skipped a couple of payments

Yes, I had.

And how much were those monthly payments?

I don't recall what the total amount of the

monthly payments were, but there was a reason for

skipping those payments.

Is there any reason you didn't ask Mr. Osborn to

take some of the money out of the PNC Bank account in

your name so that you could keep your loans current?

No.

It's because I was anticipating a PNC loan

and recognized if all of a sudden there were payments

made and there had been demands made on our loan

outstanding we would have to start all over again.

Have to start all over again.

You mean wait

another six to eight weeks to get a loan from somebody

else?

No.

What do you mean by start over?

If you apply for a loan and the bank confirms the

loan amount, if you then come back and make a payment

after that demand has been responded to, then you have

to start over again.

7 8

But, Mr. Hage, the bank doesn't ask for the

payoff demand before you apply for the loan, does it?

No.

And you had not applied for the PNC Bank loan

yet?

No.

So you wouldn't have had to start all over

I was expecting to make application.

because you hadn't started in the first place; right?

That's each right.

So is there some other explanation you would like

to provide then that makes more sense?

MR. SAMOURIS:

MR. WARFEL:

20 21 22

Objection. Sorry.

Argumentative.

I'll withdraw that.

apologize. Q.

Had you ever spoken with the CEO of Alliance,

your lender?

Yes.

And did you --

Now, wait a minute.

Alliance portfolio, their CEO.

Jim Perry?

Yes.

The Alliance CEO?

Yes.

Okay.

Do I have his phone number?

Or did you -- in September, October 2015 --

Yes.

-- did you have his phone number?

Yes.

Thank you.

9 10

And so did you have his phone number?

And you called the -- you called him

to postpone the reporting of the late payments on your loans; right?

I called and request those late fees be reversed.

And you also asked him not to report them as

13 14 15 16

being late? A.

He said -- I didn't ask him not to report it.

said they would not report it. Q.

Okay.

And those -- they were the lender on the

loans that were -- or were they the lenders on the loans

that were getting behind in 2015?

Two of the loans, yes.

And were they -- the one that was -- their

lawyers were in court ready to file an NOD?

Yes.

Why didn't you call Mr. Perry up at that time?

I didn't feel I had the luxury of time.

Well, was it because you were just about to lie

to him by entering into a phony listing agreement?

MR. SAMOURIS:

THE COURT:

Objection.

Argumentative.

As framed, sustained.

BY MR. WARFEL:

2 3

Were you just about to enter into a sham listing

agreement?

Is that why you didn't call him?

MR. SAMOURIS:

THE COURT:

Objection.

Argumentative.

Again, that includes

characterizations which are argumentative.

I'm sustaining it.

me wrong but there are limits.

Broad latitude on cross.

MR. WARFEL:

That's why Don't get

I got you.

Did you believe that the Alliance attorneys were

in the courthouse ready to file an NOD?

Mr. Osborn told me that, yes.

Are you familiar with how -- do you know what an

NOD is?

A Notice of Default.

And those don't get -- those get recorded with

the County Recorder, don't they?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Yes.

And had one already been recorded? MR. SAMOURIS:

Calls for speculation.

BY MR. WARFEL:

To your knowledge.

THE COURT:

THE WITNESS:

Overruled.

BY MR. WARFEL:

Calls for speculation.

///

Overruled. To my knowledge, no.

1 2 3 4

BY MR. WARFEL: Q.

Well, so do you understand how the default

process works with zero property in general terms? A.

I know that an NOD can be filed, but, no, I don't

know the precise procedures other than the fact that an

NOD is something you want to avoid.

Well, okay.

And you heard something about

something was going to go on at court.

didn't you call your lawyers and ask them what that

meant before you listed your property?

11 12

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Calls for

Overruled.

chance.

Mr. Osborn's suggestions.

time.

BY MR. WARFEL:

Objection.

speculation, lacks foundation.

Did you -- why

I didn't want to take a

I wanted to take care of -- I was following

Okay.

He was my advisor at the

These suggestions were made on a Friday

afternoon, weren't they?

Yes, they were.

And that Monday was a holiday, wasn't it?

I don't recall.

Okay.

Nilda Meg didn't drive down to pick up --

to get the signed applications for a couple of days, did

she?

I don't recall the timing.

Well, what is it about having the signed

application at midnight on Friday, say, what did -- how

did you think that would affect anything with the

lawyers being in court?

I felt that the lawyers would have notified the

Court that we were going to be listing the properties in

good faith.

7 8 9 10 11 12

Have you ever done such a thing in your 38 years

as working with the high asset individuals? A.

I have never dealt with real estate loans at that

level. Q.

My business was not in real estate lending. So you had given Mr. Osborn $650,000 by that

point; correct?

Correct.

He had been promising you a PNC Bank loan was

going to close soon and was going to be at the lowest

interest rate but somehow had never gotten around to

doing the application for almost two years by that time;

correct?

That's correct.

You knew he was a convicted felon; correct?

Correct.

You knew that he had been convicted of financial

crimes?

Correct.

You knew he was a con man?

Yes.

And unlicensed?

I didn't know that he was unlicensed at that

1 2

point in time. Q.

Well, you knew he had a cease and desist order

from engaging in any activity that would require a real

estate license?

correct?

Yes.

You learned that when you read the newspaper

You learned that at some point in time;

article on February 20th of 2014, didn't you?

Yes.

So by September 15 you also knew that was true?

In fact, you knew in October that was true, October 14

you already knew that, didn't you?

13 14 15

I had many conversations in between with

Mr. Osborn about his situation. Q.

So if Mr. Osborn testified that you had one brief

polite five-minute telephone conversation about this and

never spoke about it again, would that be a lie?

that be an untruth?

Would

We spoke about it numerous times, and he

convinced me that he had spent enough time in jail and

was forgiven, and I was caught up in the moment in our

negotiations and we moved on.

And so what was it about Mr. Osborn in September

of 2015 knowing all these things that you knew that gave

him any credibility at all with you?

I believed in him.

Was there anything that anybody could have said

to you that would have shaked that belief?

MR. SAMOURIS:

THE COURT:

3 4

Calls for speculation.

Sustained.

BY MR. WARFEL: Q.

So are you saying you would not have taken out a

single loan but for Mr. Osborn instructing you to do so

after -- after you purchased Savoy or just prior to

purchasing the Savoy property?

MR. SAMOURIS:

THE COURT:

Calls for speculation.

Well, again, I'm not clear.

You're characterizing something he said at that time or

as framed you're asking him to speculate.

you're -- you can rephrase it differently.

sustained.

14 15

Please rephrase. MR. WARFEL:

But maybe

Okay.

Earlier -- you said on several occasions, I

believe, during this trial that Mr. Osborn instructed

you to take out these loans.

Do you recall that?

Yes.

And when you used that terminology or say yes

when it's stated to you as a leading question, what do

you mean?

What do you mean by instructing you?

What do I mean by what?

The word "instructed."

When you use the verb

Mr. Osborn instructed me to get this loan, what do you

mean by that?

26 27 28

MR. SAMOURIS:

I'll just object that it's

overbroad, out of context. THE COURT:

Overruled.

THE WITNESS:

There was a purpose and that

was to be building this reserve fund.

going to mortgage fees.

focused on that PNC loan, and I believed in Jimmy.

had many conversations about it, and he continued to

tell me about that, and I believed in him.

BY MR. WARFEL:

8 9

Part of it was

It made sense to me, and I was We

Well, did he have any legal power over you to

force you to do anything?

No.

He wasn't blackmailing you, was he?

No.

You understood the rate and terms and conditions

of the loans that you took out?

MR. SAMOURIS:

THE COURT:

BY MR. WARFEL: Q.

Didn't you?

I understood them.

term.

was encouraging you to take these loans out? MR. SAMOURIS:

THE COURT:

THE WITNESS:

27 28

I understood them to be short

And so Mr. Osborn, would it be fair to say, he

Overbroad.

Overruled.

Objection.

Argumentative.

Overruled. Could you --

BY MR. WARFEL: Q.

Let me rephrase.

I'm trying to get a certain

concept, and I'll keep trying until we get to it.

1 2

You weren't forced to take any of these loans, were you?

No.

You came up -- you and Mr. Osborn came up with a

financial plan for you, didn't you?

Yes.

And that plan made sense to you, didn't it?

Yes.

And while in retrospect it may not have been the

best plan, at the time you thought it was a good plan?

Yes.

And part of that plan was going to be to take

this equity out of these properties to put them in some

bank account somewhere that would show liquidity so that

you could ultimately refinance all of the loans; right?

Yes.

And that's why you took out all of these loans,

18 19

isn't it? A.

20 21

MR. SAMOURIS:

Objection.

Overbroad as to

time.

22 23

Yes.

THE COURT:

Overruled.

BY MR. WARFEL: Q.

And so just as it wouldn't have mattered whether

the final lender was Sun West or PNC, the particular

lender that was going to give you the money to implement

your plan wasn't a key part of the plan, was it?

It was in my mind.

And so had you talked with Mr. Osborn in 2013

when you took Savoy and identified the particular

lenders you wanted to use to get the cash out?

4 5 6 7

No.

I was expecting that he would be directing

those loans. Q.

And he had authority to contact any lender on

your behalf, didn't he?

Yes.

And it wouldn't have mattered to you what lender

he contacted so long as it helped you implement your

plan; correct?

Yes.

And after February of 2014, you would have had

more knowledge than any lender or broker about

Mr. Osborn's criminal past; right?

MR. SAMOURIS:

calls for speculation.

THE COURT:

19 20

Objection.

Lacks foundation,

Sustained.

BY MR. WARFEL: Q.

Why did you allow Mr. Osborn to continue to seek

out loans on your behalf after you learned that he had a

cease and desist order precluding him from doing just

that?

25 26 27 28

I was relying upon his employers and their

fiduciary responsibilities to oversee his activities. Q.

Were you taking steps to protect yourself from

him? A.

I felt that conversations I had with him gave me

that comfort, but I was also expecting that his

employers would have been stepping in if he was

completely out of bounds.

Well, wouldn't accepting hundreds of thousands of

dollars personally for loan fees from your employer be

out of bounds in the banking world?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

They were reserve funds.

11 12

Calls for speculation.

Overruled. They weren't all loan fees.

None of the monies that you gave to Mr. Osborn

were for mortgage fees or loan fees?

Some of them were, yes.

Well, wouldn't that be out of bounds?

That's not

something that's permitted in the loan field, is it, the

personal payments to loan officers?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

yes.

BY MR. WARFEL:

correct?

Calls for speculation.

Overruled. It would be -- it would be --

And you were the one participating in that;

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Objection.

Lacks foundation.

Overruled. I was participating in it.

was going by his direction --

///

BY MR. WARFEL:

And you knew --

-- and representation of the companies that he

4 5 6 7 8 9

was working for. Q.

But you knew based on your experience that this

was out of bounds; right? A.

At that point in time I was blinded by

Mr. Osborn. Q.

If you were relying on Target Mortgage to protect

you, why didn't you tell Target Mortgage you wanted

protection from this felon -- unlicensed felon who was

helping you?

MR. SAMOURIS:

calls for speculation.

THE COURT:

16 17

Objection.

Argumentative,

Sustained.

BY MR. WARFEL: Q.

Is there any reason -- well, did you ever tell

Target Mortgage that James Osborn was a convicted felon

of financial crimes?

No.

Did you ever tell Target Mortgage that he had a

22 23

cease and desist order against him? A.

I would have expected they would have been

communicating that with me and asking me some questions

about -- about the loans that he was processing through

Target Mortgage.

27 28

Well, if you would have expected them to be

asking you those questions, why didn't you bring that

up?

MR. SAMOURIS:

THE COURT:

4 5

Calls for speculation.

Sustained.

BY MR. WARFEL: Q.

Did you bring up your expectation with Target

Mortgage that you thought they would be asking you

questions about Mr. Osborn not having a license and

being a convicted felon?

No.

Now, you had agreed to give Mr. Osborn $300,000

of the loan proceeds that you obtained through the

Target loan prior to accepting those loans; correct?

MR. SAMOURIS:

THE COURT:

15 16 17

Objection.

Lacks foundation.

Overruled.

BY MR. WARFEL: Q.

By October 3rd you had agreed to pay him at least

$269,000, hadn't you?

Yes.

And at the time you wrote out the letters of

explanation for what the funds were going to be used for

in your own handwriting to give to the lender, did you

already have an agreement to give Mr. Osborn close to

half of the proceeds?

24 25 26

I knew that he was going to be asking for those,

yes. Q.

And did you put that on the letter when they --

the handwritten letter exactly what the funds were going

to be used for, did you say anything that you now

interpret as being I'm going to give that much to

Mr. Osborn?

No.

When you fill out a loan application, aren't you

required to fully and accurately complete it?

Yes.

And so if you have a bank account with several

hundred thousand dollars in it in your name for your

benefit, would that be something that you believe needs

10 11 12 13 14 15

to be on the loan application? A.

I didn't look at that reserve account as being a

bank account. Q.

Well, what was it if it wasn't a bank account in

your name with PNC Bank? A.

I didn't have it on my balance sheet because it

was not part of my balance sheet.

overstate my balance sheet.

I didn't want to

Well, if it belonged to you, it was in your name,

and it was with a reputable financial institution, why

wouldn't it appear -- why wouldn't it be part of your

balance sheet?

Because I didn't have documentation to show it.

But you believed that it was, in fact, in

existence, didn't you?

Yes, I did.

And you knew from your 50 years of banking

experience that a mere phone call would immediately get

you a copy of the latest statement, didn't you?

Had I signed a signature card, yes.

So the reason you didn't put it on the loan

application is because you -- it was conscious in your

mind that you had never signed a signature card; is that

what you're saying?

6 7

I didn't have it on my balance sheet because, no,

I didn't have access to that account.

What do you mean you didn't have access?

I couldn't withdraw money from it.

Why not?

Because I didn't have control over that account.

Well, didn't Mr. Osborn tell you it was in your

name?

No.

Didn't you tell me that it was in your name?

No.

Well, whose name was it in?

I don't know because I don't -- I couldn't tell

19 20

you. Q.

Then how would it help you qualify for any loan

with any bank if it wouldn't help you qualify for the

Target loans?

Because it was not in -- it was in PNC.

It was a

PNC -- I was told it was at PNC and not at Target, and

since I didn't have that documentation, I wasn't going

to falsify my loan application.

27 28

Oh, Mr. Hage, you testified, I believe, at your

deposition you had been in banking a long time and

banking is banking.

It didn't really change that much

from one employer to the next.

testimony along those general lines?

Do you recall that

Yes.

And so that's true of all loan applications,

isn't it?

You know that you have to document the funds;

correct?

Yes.

And so you also knew that having 3- or $400,000

in the bank would likely assist you in qualifying for a

loan with any bank, PNC or anybody else; would that be

fair to say?

Yes.

But you chose not to put that on the Target

Mortgage loan applications because you knew you couldn't

establish that the money was actually in an account;

correct?

What I put on the loan application is what I had

in my personal bank accounts that I had control over,

and I was not going to overstate my bank statement, my

financial statement with something that I did not have

documentation for.

23 24

Well, why didn't you ask for documentation

knowing that it would help you qualify for the loans?

I didn't.

Well --

That was a mistake of mine.

That may have cost you a few interest points

perhaps or a quarter of a point or more, right, by not

having as much liquidity?

I don't think so.

No.

I felt that I had plenty of cash showing on my

Okay.

balance sheet that I had confirmation of.

Every time I

applied for a loan they -- the lender asked for bank

statements to back up that financial statement, and I

have always been able to deliver that quickly and

accurately.

reserve account, and I wasn't going to report it if I

didn't have documentation.

falsifying my financial statement.

And I did not have documentation for that

That would have been

Well, you actually showed on your loan

application was only $19,000, wasn't it, in liquid

assets?

I completed numerous loan applications, and I'm

not sure what loan application you had.

$19,000 on there liquidity, I had $19,000 worth of bank

statements to back it up, and you can ask Nilda about

that because she received those bank statements.

But if I had

Now, were you surprised when Mr. Osborn didn't

give you back your money when you said you wanted to

cancel and get your $400,000 back in the telephone

conversation?

I didn't give him a chance to give it back to me.

I filed a complaint with the District Attorney and

turned it over to the District Attorney.

Okay. Your Honor, it's just going to take me a minute

to switch over to some of the exhibits.

maybe a minute or so.

THE COURT:

Take about --

Well, you know what, it is

almost 4:20.

It's been a long day.

I know we've had

some starts and stops, and in part that's my fault with

what I was doing with my coughing.

if we knock off -- and I do want to spend a few moments

Does anybody object

with counsel -- that we knock off with the examination a

few minutes early this afternoon?

12 13

MR. SAMOURIS: Honor.

MR. WARFEL:

THE COURT:

That's fine with me, Your

No objection. All right.

So, Mr. Hage, why

don't you have a seat back at the counsel's table.

MR. SAMOURIS:

I say no problem with the

full confidence knowing that we're not going to finish

in the next ten minutes.

20 21

THE COURT:

Well, let me ask that.

a reasonable assumption?

MR. WARFEL:

THE COURT: Okay.

Oh, absolutely. Okay.

Well, that's what I

thought.

time -- I'm not trying to put pressure on you --

So now with that in mind, how much more

MR. WARFEL:

THE COURT:

Is that

I know. -- do you estimate that you'll

have on your cross with Mr. Hage?

EXHIBIT 24

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SAN DIEGO, CENTRAL DIVISION

DEPARTMENT C-73

BEFORE HON. JOEL R. WOHLFEIL

JOHN SCOFIELD HAGE; and BONNIE GRACE HAGE,

) ) ) PLAINTIFFS, ) ) VS. )NO. 37-2016-00003885) CU-FR-CTL ) GOTMORTGATE.COM, a California ) corporation; JAMES M. OSBORN, JR.,) an individual; TARGET MORTGAGE, ) INC., a California corporation; ) ANDREA HAEWON PARK, an individual;) THOMAS IPING LO, an individual, ) and DOES 1-25, inclusive, ) ) _______DEFENDANTS. ) ) AND RELATED CROSS-CLAIMS. ) __________________________________)

EXCERPT TRANSCRIPT OF PROCEEDINGS TESTIMONY OF JOFFREY LONG JUNE 12, 2017

DIANE DELANEY-DAUPHINE, CSR 3612 COURT-APPROVED COURT REPORTER

INDEX - HAGE VS. GOTMORTGATE.COM, ET AL. JUNE 12, 2017 WITNESS

JOFFREY LONG Direct Examination by Mr. Samouris Cross-Examination by Mr. Warfel

4 29

THE WITNESS:

Yes, it is.

Mr. Warfel, these

are copies of Burch's report, but these are not things

I'm reading from.

4 5

MR. WARFEL:

I just wanted to get whatever

you're reading from.

THE WITNESS:

MR. WARFEL:

THE COURT:

MR. WARFEL:

THE COURT:

Okay. Thank you. Are you ready to go, Counsel? Yes, sir. All right.

11 12 13 14

CROSS-EXAMINATION BY MR. WARFEL: Q.

Was there anything in any of the loan files or in

any of the testimony by Mr. Hage that indicated that he

did not understand the loan terms that he ultimately

received from -- in the Velocity loans?

I didn't see anything that indicated that.

And so if he was aware of and approved of those

loan terms prior to accepting those loans, what damage

would he have suffered from not having a second GFE, for

example?

Well, we actually -- you asked this question at

the deposition, and I'll repeat the same answer from

that time.

because had he received a correct GFE or a correct

mortgage loan disclosure statement --

And that is that we don't really know

You mean to say corrected?

In other words, I'm

sorry.

Let me interrupt and ask a different question. Are you saying that the original GFE was

inaccurate as to the loan that was being attempted at

that time, or are you saying it doesn't accurately -- it

doesn't accurately reflect the loan he ultimately got?

The latter.

Okay.

So when you say a correct GFE, you mean by

that a second -- a new GFE?

Correct, a new one.

Okay.

And let me make it even more clear by saying a

I'm sorry.

new and correct GFE based on the information that was

clearly available about the new terms that were now

available as opposed to the terms that had been

misrepresented to the borrower in the beginning because

I can't say that anything was even represented correctly

in the beginning.

18 19 20

And so basically it's impossible for you to know

whether there was any damage or not? A.

It's impossible for me to know if the borrower

had they received the correct information earlier and at

the time prior to the very closing if they had received

a revised disclosure, particularly the mortgage loan

disclosure which is required in this transaction, if

they had received the correct forms and had more time if

they would have gone and perhaps looked at other loan

alternatives.

Okay.

But you haven't seen anything to indicate

that Mr. Hage would actually have done that, have you?

I have not.

Okay.

Now, are you aware from reading Mr. Hage's

deposition that he was well aware that Mr. Osborn had a

criminal history?

I saw an indication that he was aware of it.

And so if Mr. Osborn's mother had wanted a loan

and she wanted her son to be involved in some way, would

that have imposed a higher standard of care on a broker

if she was trying to get a commercial loan?

happens.

have a parent who --

That's an excellent question because that often We often have situations like that where we

Yeah.

I'm sorry.

That's a yes or no question in

the interest of time.

duty even if it was a relative?

Yes.

Okay.

Would he have also had a higher

And what exactly is it that you think that

Target should have done had they known that he was a

convicted felon?

Well, as I stated, in -- two parts of it.

Number

one, I don't think Target should have allowed -- whether

he was a convicted felon or not -- allowed Osborn to

interact with the borrower the way he was.

clear -- even today Ms. Meg testified that when she gave

loan scenarios to Osborn to give to Hage, that certain

things happened.

terms of loans or information about loans was being

And it's

And so obviously loan scenarios or

provided through Osborn.

whether he was licensed or not.

that he wasn't licensed even if it's let's say -- let's

say it's something acceptable like a referral source who

is helping out by chauffeuring documents back and forth.

Somebody referred a loan to a broker --

7 8

I'm sorry.

That should not have happened But upon finding out

My question is:

What specifically

should Target have done differently?

And that's what I was trying to answer.

Okay.

So if -- if there's a situation where there's a

Go ahead.

referral of a loan and the person -- the person who

referred the loan is not engaging in activity requiring

a license.

house and picking up a bank statement and bringing it to

the broker.

quoting rates.

borrower.

If the broker finds out that that person has a criminal

record or has a cease and desist order from the Bureau

of Real Estate, then the broker will have to make a very

careful investigation and perhaps discuss with the

client that this person has a criminal record, and we're

going to have to find a different way to get documents

going back and forth.

situation under which a broker would allow someone with

a criminal record like that, particularly in mortgage

fraud, to have any interaction with their borrower

Let's say they're driving to the borrower's

If that's the case -- and they're not They're not negotiating on behalf of the

They're not doing any of those other things.

It's very difficult to see a

1 2

unless it's under a very carefully supervised situation. Q.

Well, are you aware that Mr. Hage testified that

he spoke with Mr. Osborn almost every day for more than

a year prior to having any contact with Target Mortgage?

I saw that.

And that he trusted him explicitly?

Yes, I saw that.

And did you notice on the e-mails from Mr. Osborn

to Target Mortgage in the files that the Hages produced

that Mr. Hage was blind copying Mr. Osborn with copies

of his tax returns and other sensitive financial

information?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

16 17

Objection.

Lacks foundation.

Overruled. I believe I saw that.

BY MR. WARFEL: Q.

And so how could Target have prevented the

interaction between Mr. Osborn who Mr. Hage already knew

was a felon if he's sending him blind carbon copies?

There's still information that indicates that

Target had other involvement with Osborn and it was

communicating other information through Osborn and that

Osborn was still very active in the process.

So do you agree that there's nothing Target could

have done to avoid Mr. Osborn from receiving all of the

financial and other sensitive information that the Hages

had?

If it was sent by blind copy, no, they wouldn't

1 2 3

have known about it, so they couldn't have prevented it. Q.

And Mr. Hage consented to that, did he not, by

sending it himself?

Correct.

And Mr. Hage never told Target Mortgage or Nilda

Meg that he knew that Mr. Osborn had a cease and desist

order, he could never be licensed and that he had a long

history of mortgage and insurance fraud, did he?

What is your question?

Mr. Hage knew all those things and never told Meg

or Target Mortgage about it; right?

MR. SAMOURIS:

THE COURT:

THE WITNESS:

Target or not.

BY MR. WARFEL:

Objection.

Argumentative.

Overruled. I am not aware if he told

Well, did you read his deposition?

Yes.

Okay.

If it's the case that he never told

Target, does Mr. Hage have any responsibility at all for

Target not being able to -- to tell him be careful,

you're working with a felon; we advise you not to share

your sensitive information with him?

24 25 26 27 28

The licensee has the duty to use the utmost

standard of care. Q.

I understand that.

Does Mr. Hage have any duty

whatsoever to protect himself? A.

It's prudent for a borrower to protect

1 2

themselves, but many of them don't. Q.

Don't we all have a duty to take reasonable,

prudent actions to protect ourselves?

MR. SAMOURIS:

THE COURT:

6 7

Calls for a legal analysis.

Sustained as framed.

BY MR. WARFEL: Q.

So you said essentially the licensee should

counsel the borrower and say be careful, this person

you're trying to have involved is a felon; right?

That's not exactly what I said.

Well, and not to share loan information with that

person; right?

That's not what I said.

So what action is it that the borrower -- the

15 16

broker should take again? A.

My opinion is that the action that the broker

should take is to, number one, contact the client and

discuss the fact that they can't allow information to go

back and forth between the convicted felon anymore.

again --

Who can't allow information to go back and forth?

The broker.

Between the broker and the felon?

No.

Now

Between -- if there's information being

passed back and forth between the broker and the felon

and the borrower.

copies of tax returns being sent, there's no way to know

about that.

Now, I understand if there's blind

So that's -- that's not part of this.

But

if -- if a broker finds out that -- and makes the effort

to find out that a person who is somehow involved in the

transaction, somehow interacting with the borrower and

somehow interacting with them is a convicted felon, the

broker has a duty to stop that or put it under some kind

of supervised method where they can avoid further damage

to the client.

8 9

Well, Target could not possibly have stopped the

communication between Mr. Hage and Mr. Osborn; correct?

I agree.

And so what evidence do you have that Target gave

any loan terms to Mr. Osborn or used him to negotiate in

any fashion the loan?

Well, aside from Ms. Meg's testimony today where

she testified about giving scenarios, loan scenarios to

Osborn, there are also a number of texts that go back

and forth that talk about loans and can this loan be

done and can that loan be done.

And so if a convicted felon sends a text saying I

know somebody who wants -- hi, I'm a convicted felon; I

know somebody who wants to get an 80 percent loan to

value on a rental property and the licensed person

contacts the potential borrower directly, isn't that

exactly what you're suggesting should happen?

25 26 27 28

If that's what occurred, that is what I'm

suggesting. Q.

Now, have you typed James Osborn's name into the

BRE licensing Website?

Yes, I have.

And his name doesn't pop up, does it?

It does.

And where does it pop up?

I located it on several occasions, but I located

it again this morning when I typed it into the search

box in the upper right-hand corner.

8 9 10

Under licensees, like if you're trying to check

on somebody who has a license? A.

No, it doesn't show up if you're checking on

licensees because when you go into the box to check on

licensees, it only gives you information about people

who has a license, and he doesn't have a license so it

doesn't show up there.

15 16

Now, do you agree that Mr. Hage knew that

Mr. Osborn was not licensed?

It appears he did.

And he knew he was a felon?

Yes.

And he had already given Mr. Osborn quite a bit

of money prior to Target being involved; correct?

That's my understanding.

And so how could Target have prevented -- you

said if Target Mortgage had followed the proper

procedures and properly interacted with the borrower

regarding the terms of the loan.

regarding the terms of the loan?

What did they do wrong

Well, not -- if they had interacted correctly

across the board.

Obviously the -- not giving the

borrower the correct disclosures about the terms didn't

cause the borrower -- didn't directly cause the borrower

to lose additional money.

factors allowing the non-licensed person to work as a

loan originator and bring in the loan, allowing a

non-licensed person to interact with the borrower, and

that the way in which the loans were completed created

the situation where Osborn was able to take additional

But the -- the combination of

money from Mr. and Mrs. Hage.

Granted that before he

started doing loans through Target, he had already had a

lot of money taken from him which doesn't relate to

Target.

Now, Mrs. Meg testified at her deposition, did

she not, that Mr. Osborn did not engage in any activity

that required a license; correct?

That was her testimony.

Okay.

And Mr. Hage did not testify about any

activity that he's aware of that Mr. Osborn would have

required a license, did he?

21 22

MR. SAMOURIS:

Objection.

testimony.

THE COURT:

You can answer.

THE WITNESS:

like that.

BY MR. WARFEL:

Misstates

Overruled.

I don't recall the testimony

And so is your opinion based entirely on

1 2

Mr. Osborn's testimony about what he did and didn't do? A.

My opinion is based on a number of items which I

went over earlier, but I would be happy to go over them

again.

5 6

Well, to what extent is it based on Mr. Osborn's

testimony?

To some extent but not entirely.

Okay.

So you said if they had followed the

proper procedures and properly interacted with the

borrower regarding the terms and objectives and not

allowing a non-licensed, convicted felon to interact

with the borrower, that would have prevented a large

loss.

Mr. Hage from interacting with Mr. Osborn?

So how could Target Mortgage have prevented

Well, the whole setup that they had.

They had

Osborn bringing in loans, talking about terms.

Scenarios being thrown back and forth.

much money.

that.

understand that Mrs. Meg eventually talked to Mr. Hage

about certain things she needed for the loan.

continued interaction -- had Target investigated and

found out the information about him and then shut down

those loan activities to the extent that they involved

him, that would have then prevented Osborn from going

through with his plan at least to the extent of loans

that he got through Target Mortgage.

We need this much money.

We need this Comments like

And then loans being started, and then I do

But his

Well, suppose Mr. Hage had telephoned Miss Meg

and said:

I've known for six months now that Mr. Osborn

has a cease and desist order and he's unlicensed and

he's got a felony background, you're saying that Target

Mortgage should have said:

for you, Mr. Hage?

Then we will never do a loan

That's not what I said.

Okay.

8 9

So there's no problem with him going

forward with the loan, is there? A.

There is a problem.

There is -- certain

precautions and safeguards have to be put into place to

make sure that -- that the person isn't being taken

advantage of and to insulate the borrower as much as

possible from possible fraud.

Well, if the person you're trying to protect

refuses to give you accurate information and goes behind

your back, is there anything the mortgage broker can do

about that if they're lied to and the person continues

to interact with the felon or the bad person, whatever

reason the person is bad?

There's nothing they can do specifically about

things that occur that they don't know about or

interactions that they don't know about.

And so what evidence do you have that Target

Mortgage was able -- or had some ability to control

Mr. Osborn or direct his activities?

26 27 28

Well, payment of $16,000 compensation is a large

way to control someone's behavior. Q.

Okay.

So isn't that a little bit circular?

that was commission, then, therefore, they would have

had some ability to control?

3 4

You're making a statement.

Do you have a

question?

answer?

Yeah.

Is your conclusion justifying your -- your

I'll rephrase. If Nilda Meg had loaned money to Mr. Osborn after

the loan is closed, would you agree that that would not

give -- have given them the ability to control him prior

to that time?

No.

And so why not?

I want to make sure my answer was understood.

My answer was no.

If Target Mortgage had loaned

him money instead of paying him a commission, Target

Mortgage could still have controlled what was going on.

It wasn't just the payment of money that was --

listed.

what Osborn did or didn't do?

21 22

Well, right.

Before that was the only thing you

What else suggests that Target was controlling

Giving him information, interacting with him

about the status of the loan.

Okay.

Those are the primary things.

Okay.

Anything else?

Did you analyze the monthly debt that the

Hages had prior to the Target loans?

Yes.

And what did -- did you arrive at a number?

I don't have those figures in front of me.

Well, it was at least $15,000, wasn't it?

Again, I don't have the figures in front of me.

Okay.

Let's do a hypothetical.

between 15- and 19,000.

according to you; right?

Suppose it was

Their income was only 15,000

Correct.

And so they would have lost all their properties

in very short order based on your analysis; correct?

That's not necessarily correct.

Well, why wouldn't they have lost their

properties without the Target loans if their income was

$4,000 under what -- their loans only without living

expenses was?

that --

Well, what are some of those variables?

Well, it depends on how much additional cash they

19 20 21

Well, there are a lot of other variables

had. Q.

Well, do you know how much cash they had prior to

the Target loans?

I don't have that in front of me at this moment.

And so would it be an extremely important thing

to know how much cash they had to know whether or not

they were going to default on their loans before the

Target loans?

27 28

You're asking -- I'm trying to understand your

question.

1 2

Well, here's my question.

You said they only had

$15,000 monthly income in 2014; correct?

That's what the 2013 tax return reflected.

Okay.

5 6 7

And why do you think the 2013 tax return

is relevant to the loans in October of 2014? A.

Well, the 2014 tax return was the most recent

completed financial document --

I'm sorry.

Did you say 2013?

I meant to say -- I'm sorry -- the 2013 tax

return was the most recent completed financial document

that would have been used to analyze income for the

purpose of understanding the borrower's income during

the year 2014.

Okay.

And if -- when they walked in the door, so

to speak, they already had mortgage debt of 19,000, are

you saying that no loan could ever be made to them under

that -- no further loans could ever be made?

No, I'm not saying that.

Okay.

So if the loan improved their situation

even if they remained underwater, would that be a

sufficient reason to give someone a loan?

Well, if someone -- if someone is in a situation

where they're underwater, as you say, or where their

debts already exceed their income and they are in a

position to borrow money and they have a very clear plan

of maybe taking out one loan and then resolving the

problem by selling some properties or something else

that's very clear, very clearly laid out and they're

taking action on it and the broker has made a very clear

disclosure to the borrowers to the fact they're going to

have to do something and what their circumstances are

and what they're going to have to look out for, it may

be possible to make one loan.

three loans in a row in a 30-day period when there is no

evidence of anything being done to resolve the

situation.

9 10

I can't see just making

Well, did you have a discussion with Mr. Hage

about his conversations with Nilda Meg?

I did not.

Did you have a conversation with Nilda Meg about

her conversations with Mr. Hage about his situation?

I haven't spoken to Nilda Meg.

In order for the broker to meet their fiduciary

duty to discuss with the borrower their options and what

situation they were in and whether or not they ought to

get these loans, does that have to be in writing?

It doesn't have to be in writing, but in a

situation like this where it's very extreme, it would be

normal for that to be in writing.

Well, if you were dealing with a mortgage banker

with 40 years of experience who himself counseled

wealthy individuals for 30 years about how to handle

their finances, would that require the same level of

interaction as with a normal wage earner?

27 28

Well, who are you saying as a mortgage banker for

40 years?

Mr. Hage.

I didn't understand he was a mortgage banker.

Well, it's a hypothetical.

Oh, if he was.

Because he -- my understanding is

he was in some other type of banking, not mortgage

banking.

So if he was a mortgage banker, would that

require the same level of interaction as with a wage

earner?

10 11 12

It depends on the person's level of

sophistication and how they're handling their affairs. Q.

And so if someone was -- the more sophisticated

and knowledgeable someone is the less interaction

required from the broker; would that be fair to say and

vice versa?

person, the more time the broker needs to spend with

him; the more knowledgeable, the less time?

In other words, the less knowledgeable the

Well, it's knowledgeable and also the practices

that they're putting into play in managing their own

finances.

and not necessarily making good decisions about their

own finances.

knowledge, but surprisingly making very good decisions

about their finances.

Because some people are highly knowledgeable

Other people are very lacking in

Well, in order to counsel anyone successfully,

isn't it a requirement that the person being counseled

make a full and accurate disclosure of what's really

going on?

It's very helpful but not completely necessary.

You can still counsel someone to the best of your

ability based on the information they provide.

And so do you have any evidence that Nilda Meg

did not counsel to the best of her ability based on the

information she had Mr. Hage about his financial

situation as related to these loans?

8 9 10 11

I don't have evidence to prove a negative, but I

don't see evidence of the counseling and of the care in that area. Q.

Okay.

Since you don't know what the negative was

prior to the Target loans and you don't know how much

cash the Hages had, how is it that you're making the

determination that $700,000 cash out was too much to

meet their objectives?

I didn't say that 700,000 cash out was too much.

Well, previously you said you wouldn't have made

three loans to them, and the three loans ended up being

700,000.

to take out all three loans and that was the right

number to solve their financial problems, would you

still say the loans were not good?

If the only way you could get the 700,000 was

Well, the challenge that I have with the loans is

not so much the cash out.

increased their debt service.

26 27 28

The challenge is how much it

Well, it increased their debt service by

approximately $5,000 a month, didn't it? A.

Correct.

And so do you know how many times 5,000 goes into

700,000?

140.

That's more than ten years?

Correct.

So they would -- by borrowing this cash, they

would be able to meet their deficit for at least ten

years even if they stuffed it under a mattress; correct?

Well, I disagree with you for two reasons.

First, I disagree that they would be able to meet their

deficit because we just talked about the fact that they

already had a deficit above the $5,000 going into these

transactions and now they added $5,000 more per month to

their deficit.

we're not -- the idea of taking out loans where one is

just going to use the proceeds of your loans to make

payments on your loan is not something that -- that is

sound or makes any sense at all.

this person will take out a loan and -- well, how are

they going to make the payments?

They got cash out from the loan, so they're just going

to use up the cash from their loan.

23 24

But more importantly is the fact that

For someone to say

Well, they got money.

How long have you been involved in the real

estate business?

40 years.

And do rental properties -- do the rents on

rental properties normally go up -- generally up rather

than down?

Generally in a certain type of economy, yes.

And so what would be a fair amount that you could

predict rents might go up in the next ten years

annualized?

basis upon which to make decisions?

6 7

Would 3 percent be a reasonable estimate or

My 40 years of experience tells me you can't

predict ten years out on something like that.

Well, how far can you predict out roughly?

It depends on the type of property.

Well, if you're trying to counsel a person who's

sitting in front you asking for a loan on a rental

property and you're helping them make a plan, part of

that plan would be going forward, would it not?

Yes.

And so as part of that, you would have to put in

some estimate for how much their rental income was going

to increase, would you not?

I disagree with your statement.

Well, would you only take a snapshot and not

20 21

consider future rent increases? A.

I think that it would be more important for the

client to decide what factor in rent increases they want

to use because then the client could -- if a client

feels that rents are going to go up X percent per year

and they want to factor that in, of course then you have

to deal with how much your expenses are going to go up

per year and whether vacancy rates will change from year

to year and how much maintenance those properties need.

So there's a lot of other factors --

2 3

Those are things that only the client can choose

wisely; right?

Those are things that the client will have to

make a decision as to what increases or what expenses

they want to project.

Okay.

And similarly, if they've got cash for

investments, it would be up to the borrower to forecast

a return on investment of that; correct?

I agree with that statement.

Well, we do know, though, that if you put money

in the bank, $700,000, for example you could probably

get at least 2 percent; would that be fair to say?

I disagree with that.

One and a half?

I disagree with that.

What do you think the amount that you could get

Returns on savings are very low today.

18 19 20 21 22 23

is?

low. Q.

Extremely

They're below the numbers you gave. Well, is there any investment that one could make

with $700,000 that would pay more than 1 percent? A.

I believe there are some savings -- money market

savings accounts that pay slightly above more than 1

percent.

27 28

Like 1.1.

And then there are other slightly more risky

investments that certainly pay a lot more; correct? A.

Correct.

And so would it be the mortgage broker or the

borrower who would decide what type of investment, the

level of risk and therefore what to forecast?

The borrower would make those decisions.

Well, so in this case if the borrower has enough

cash to pay the increased debt load, just focusing on

the increase, not the prior, for at least ten years --

and, of course, no one forecasts ten years -- that means

at least half of that money, say, if you only go out

five years, they would have available to make other

investments and still carry their debt load; correct?

I am not as a lender going to sit here and say

that you can take out loans and that your source of

repaying your loans is going to be the cash proceeds

that you got.

payments on a loan that you just borrowed that -- I

just -- that -- I think even the most liberal

asset-based lender would have a problem with that.

Really?

Borrowing from yourself just to make the

So it's your experience that asset-based

lenders are primarily concerned with the income of the

borrower?

I didn't say that.

Well, do they even care what the income is?

Many do.

And many don't; correct?

Very few don't.

So do you believe it's below the standard of care

for anyone to ever broker a reverse mortgage?

No.

Well, isn't that exactly what you're doing?

You're borrowing against your house, and you have no

income to pay it back?

Well, there's a very, very large distinction with

a reverse mortgage from the other types of scenarios

you're talking about.

And what is the relevant distinction?

The very large distinction is with a reverse

10 11 12

mortgage you're not required to make payments. Q.

Was there anything preventing the Hages from

selling any of their properties at any time they wanted?

Not that I'm aware of.

And were you aware that they had balloon payments

coming up in -- within just a couple of years on three

-- I believe three of their properties?

I'm aware of that.

And so if the Hages didn't get loans, they would

have had to sell those three properties; correct?

I can't --

All other things being equal -- unless they came

up with the cash somehow miraculously; correct?

been.

I don't know what their circumstance would have

You're saying their income for all you know may

have increased so much in the next year that they

wouldn't have had to sell any of those properties?

I didn't say that.

Well, it seems like you're just trying to avoid

the question altogether.

payments came due, would it be reasonable for them to

borrow enough money -- or borrow money to avoid having

to sell those properties?

If in 2016 their balloon

If the balloon payments came due -- I will answer

your question.

If the balloon payments came due or were

within a few months of becoming due and they didn't have

the cash to pay them off and they didn't have another

method of paying them off and they didn't take out a new

loan, it would appear selling the properties would be

the only alternative.

And then they would have to pay long-term capital

gains tax of 20 percent, 13.3 state income tax.

So they

would lose 30 percent of their equity, wouldn't they?

I'm not qualified to testify on taxation.

Well, whatever the taxes are, they would have to

18 19 20 21

then pay your taxes on that; right? A.

I'm not going to answer tax questions.

I'm not

qualified nor licensed to give advice on income taxes. Q.

Okay.

If the Hages get a loan they can't afford

-- well, they had already some loans they couldn't

afford.

afford, and they can't make the payments.

that force them to do?

But let's say they take another loan they can't What does

Well, there are a number of alternatives that a

borrower would have if they take out a loan and can't

make payments.

What are they are?

Well, they can sell property.

They can take out

other loans.

period of time, and there are other alternatives other

than that.

They can enter into a bankruptcy for a

Were any of those alternatives proposed by the

Target Mortgage -- the loans that Target Mortgage

brokered to Velocity Commercial Capital?

9 10 11

I'm sorry.

Could you repeat the question.

didn't hear what you said. Q.

Well, prior to the Target Mortgage loans, the

Hages had those three opportunities, right, because they

were underwater?

they were either going to have to file bankruptcy, sell

or borrow more money; correct?

16 17 18 19

Assuming they were underwater.

If they didn't have another source to bring their

loans -- pay the loans, they would have. Q.

Okay.

And they chose one of those three

alternatives, didn't they?

I mean they took out other loans.

Well, that was one of the three you listed as

their only -- were their primarily three possibilities;

right?

Correct.

Okay.

26 27 28

They could have filed bankruptcy after

they took these loans, couldn't they? A.

You know, I probably shouldn't comment about

bankruptcy because I'm not really qualified to comment

about bankruptcy.

I --

Okay.

So that leaves, two; right?

Let me just clarify for the record that the

previous comment I made about bankruptcy is strictly

based on my observation that sometimes when people have

difficulty making payments it appears that they file

bankruptcy.

not --

But, again, I'm not an attorney, and I'm

So is it safe to say --

-- qualified to opine on bankruptcy law.

Okay.

I'm sorry I'm talking over you.

I'm

looking at the clock, and so I apologize for that.

So the other two options that you are familiar

with and have the ability to offer expert testimony is

they could have either sold or borrowed more money;

right?

Those are two options that existed.

Okay.

19 20 21 22

If they borrow the money and then sell,

they also solve the problem; correct? A.

If they were successfully able to borrow the

money and then sell the properties, they would. Q.

So is there anything that prevented the Hages

from selling these properties after taking the Target

Mortgage loans that further increased their debt load on

top of what they already had?

26 27 28

Nothing I'm aware of other than the large

prepayment penalties they would have had to pay. Q.

And what were the prepayment penalties?

I don't have those calculations in front of me.

Well, then how do you know they were large?

I recall from reading that they were large

4 5

prepayment penalties. Q.

Okay.

And they had prepayment penalties on their

hard money loans that they already had gotten from

Gotmortgage too?

I believe that's true.

So either way they're going to end up paying a

prepayment personality if they sell; right?

That would depend on when they sold.

Okay.

And I believe your ultimate testimony was

that ultimately it is up to the borrower whether to take

the loans or not; is that right?

15 16 17

Ultimately the borrower will decide whether or

not to take the loan. Q.

And so the broker can't keep the borrower from

borrowing.

see their way forward, make sure they have some kind of

plan; right?

All they can do is counsel them, help them

They can do that, and they can also operate

legally and have licensed loan originators interact with

the borrower.

Okay.

And so if Mr. Hage was bound and

determined to borrow this money because he had some

urgent need -- use for the money, is it a breach of

fiduciary duty to put him in touch with someone who's

willing to give him that money?

Not in and of itself.

And if he already has a plan, a financial plan,

and this is part of it, is it any breach of fiduciary

duty to put him in touch with a lender?

Just -- just brokering a loan or putting someone

in touch with a lender, in and of itself isn't a breach

of fiduciary duty.

circumstances, and I described what my concerns were

about the overall circumstances.

Right.

It depends on the overall

But if Mr. Hage already had a plan by

which he was going to basically get out of this mess,

you know, if he's underwater, if he already had that

plan and this was part of it, then that would not be a

breach of fiduciary duty to allow him to get that loan;

correct?

Well, again, it would depend.

It would depend on

what kind of plan the individual had and how that -- and

what the broker's level of knowledge was of it and the

way the loans were handled.

tie into it.

of these things you're saying and saying, well, if this

happened this way, that wouldn't be a breach of

fiduciary duty.

here that has to be seen.

All of those factors would

So it's difficult for me to take any one

It's the whole -- the overall picture

Well, as regard to Mr. Osborn stealing the money,

are you essentially saying that if Target hadn't handed

it -- figuratively speaking, handed the money to

Mr. Hage, then obviously Osborn couldn't have stolen it

1 2 3 4

from him? A.

Not in and of itself.

It's just that if -- no,

that's not what I'm saying. Q.

Okay.

If Mr. Hage had borrowed the money from

another source and Mr. Osborn was not involved in any

way in the discussions, had nothing to do with that

loan, but the money was sitting in Mr. Hage's bank

account, are you saying that Mr. Hage would not have

given that money to Mr. Osborn?

MR. SAMOURIS:

THE COURT:

12 13

It calls for speculation.

Sustained.

BY MR. WARFEL: Q.

Are you saying it's a but for the involvement of

Target Mortgage that Mr. Osborn would have would not

have been allowed -- would not have been able to steal

money?

17 18

MR. SAMOURIS:

Calls for speculation.

Legal

analysis as well.

THE COURT:

Overruled.

Do you understand the question, sir?

THE WITNESS:

THE COURT:

THE WITNESS:

Yes. All right.

Please answer it.

The way that -- the way that

it was handled by Target and the -- allowing Osborn to

be involved the way he was involved to the extent that

Target knew about it created a situation where Osborn

was able to get the borrower to pull money out of their

property that the borrower could steal.

1 2 3 4

BY MR. WARFEL: Q.

What evidence do you have that it was Mr. Osborn

who was leading Mr. Hage to borrow the money? A.

There are a number of items.

There's the

different depositions, deposition of Mr. Hage,

deposition of Mr. Osborn.

went on with the text messages, and I understand that

the text messages were after these loans were done, but

it was clear that there was a back and forth working

10 11

There's the practices that

relationship with -- with Osborn working under Target. Q.

So what did Mr. Hage say in his deposition that

led you to believe that Mr. Osborn was the motivating

force in him getting these loans?

Well, there were various things he said over a

period of time about how Osborn would contact him, tell

him that we needed to take out another loan.

to show more reserves.

of this property, and now we can get money out of that

property.

We needed

We needed to get more money out

Well, did you also see the testimony from

Mr. Hage when he testified that before he even took the

Savoy loan he already had a plan to take out all this

money?

24 25

MR. SAMOURIS:

Lacks foundation,

misstates testimony.

THE COURT:

MR. WARFEL:

Objection.

hypothetical.

Overruled. I'll rephrase it as a

THE COURT:

Well, that's what I was about to

say.

that Mr. Hage has not yet testified, as a hypothetical

based upon an assumed set of facts.

MR. WARFEL:

THE COURT:

I'm treating all of these questions, recognizing

And so intended. All right.

With that in mind,

overruled.

Do you have the question in mind, Mr. Long?

THE WITNESS:

THE COURT:

MR. WARFEL:

THE COURT: That's fine.

No.

If he can ask it again.

Madam -I'll rephrase, Your Honor. You want to rephrase.

right.

pressure you -- how much longer do you have?

Now, Counsel -- I'm not trying to

MR. WARFEL:

THE COURT:

Now, will there be

At this point I don't think

so, but if I do, it will only be five minutes. THE COURT: minutes.

Well, no.

We don't have five

I told you from the very beginning --

22 23

Well, okay.

MR. SAMOURIS:

20 21

I'll finish up at 4:30.

any more redirect?

18 19

All

MR. SAMOURIS:

Yes.

Then I will not have

any questions.

MR. WARFEL:

With that understanding, then I

will finish.

Otherwise, of course, I would rather come

back and finish tomorrow.

so he can go home, I would be happy to finish up in the

next two or three minutes.

But if that's going to end it

THE COURT:

lots of heads up.

of time, though.

4 5

MR. WARFEL:

All right.

So all right.

I'm sorry.

Folks, I gave you So you're almost out

Can you read the

question back.

(Last question back.)

THE WITNESS:

I saw various testimony about

the aggressive money being taken out.

him saying that he had a plan to take out all that money

at the time of getting the Savoy loan.

BY MR. WARFEL:

Okay.

I don't recall

Let me make it a pure hypothetical.

If Mr. Hage had a plan to take this money out for

some purpose -- it doesn't matter what the purpose is --

but prior to getting the first loan, would that indicate

to you that it was not Mr. Osborn who was pressuring him

into getting these loans?

No.

Okay.

What evidence did you see that made you

believe or come to the conclusion that Target Mortgage

knew that Osborn was a felon?

22 23 24

I didn't indicate that I thought that Target

Mortgage knew he was a felon. Q.

If Osborn was working for a different -- for

Gotmortgage or anybody during this entire time, would

Target have had a duty to research his background if he

was not performing loan origination services for Target?

Well, my testimony was that he was performing

loan origination services for Target.

Right.

So will you please answer my question.

And your question was?

If he was not performing mortgage loan

origination services for Target Mortgage, would Target

have had any duty to research his background?

If he was not performing loan origination

services and not involved in interacting with the

client, no.

Are you saying that anybody who interacts with a

client that the broker has a duty to investigate their

background?

No.

What if the borrower says I already know all

about his background and I'm fine with it, do they have

a duty then?

I think there's still a duty to investigate.

THE COURT:

MR. WARFEL:

THE COURT:

MR. WARFEL:

THE COURT:

Counsel. Done. It's 4:30. Yes, Your Honor. Again, if you want to bring him

back tomorrow, you can, but this is the price you all

pay if you want to finish this expert today.

done?

MR. WARFEL:

MR. SAMOURIS:

MR. WARFEL:

Assuming he's not -I'm done. Then I'm done.

Are you

1 2

THE COURT:

So cross is done.

No redirect.

May Mr. Long be excused?

MR. SAMOURIS:

MR. WARFEL:

THE COURT:

All right.

So, folks, let's take just a

Yes. Yes, sir. Thank you very much,

Mr. Long.

7 8

moment before I let you go.

We've got a ton of people

coming to our department tomorrow morning, so please

protect your belongings.

afternoon is a shorter day.

2:30, and then we'll have a full day Wednesday and

Thursday.

Please recall that tomorrow We'll wrap no later than

Now, I know my deputy is going to want you

to clean up and get you out of here within a few

minutes, but with that in mind, do you have any

estimate -- who do you have left to call?

MR. SAMOURIS:

Well, we have to finish up

with Ms. Meg, and I plan to do that tomorrow morning and

put her back on the stand and finish her up.

have my damages expert and Scody Hage and Bonnie Hage,

and I would love to be able to finish all that up

tomorrow if we can.

but --

And then I

I don't know how realistic that is

THE COURT:

All right.

Well, folks -- and I

don't say this as if I'm trying to prejudge anything --

but you have presented already through your respective

examinations a lot of information.

So please bear that

in mind.

overly complicated case.

respective theories which you feel very strongly about,

but nonetheless a picture is emerging.

to counsel.

heard -- we've heard a big chunk but not all of

plaintiffs' case, and we're still waiting to hear the

defense case, but a picture is emerging.

have to reinvent the wheel for every witness.

I'm not necessarily finding this to be an Each of you have your

That's a credit

And, again, I want to emphasize we've only

So you don't Please

bear that in mind.

MR. SAMOURIS:

THE COURT:

Absolutely, Your Honor.

All right.

Okay.

So with that

in mind, if not tomorrow what I'm hearing you say is by

noon on Wednesday?

15 16

MR. SAMOURIS:

THE COURT:

Right.

Exactly.

Normal breaks

until 2:30.

Now let me go to the defense side since we

are at the end of Monday.

Wednesday.

you're going to be calling?

And

tomorrow we have until 2:30; is that right?

17 18

Yes, Your Honor.

You'll be calling witnesses

Do you have any sense for how many witnesses

MR. WARFEL:

Yeah.

I'll be calling La

Tasha, the loan processor.

What I plan to do is go

through at least one of the loan files and probably only

just one with her.

the Target Mortgage perspective on these loans.

Meg briefly, our expert witness Mr. Burch, the lender

I'll talk about what happened from Nilda

representative.

MR. SAMOURIS:

MS. MEG:

MR. WARFEL:

What's his name?

David Bilandzija. David Bilandzija.

And I

believe -- they could have a second witness -- I'm

trying to get his name.

He's like a CEO or vice

president or something.

Only in direct rebuttal of

something that came up, you know, about this testimony

here today about what the lender would or wouldn't have

done.

THE COURT:

MR. WARFEL:

Uh-huh.

And then Mr. Osborn.

Mr. Osborn.

So I'm going to

try to avoid too much direct testimony from Mrs. Hage.

I'm going to try to play her deposition rather than ask

her the same questions.

do as much as possible.

THE COURT:

So that's how -- I'm going to

Now, do you have any idea how

much more testimony from Mr. Osborn you're going to be

playing?

MR. WARFEL:

I am working hard to cut it

down.

The further I put it off the more I can cut it

down.

And so there's -- he has said an awful lot of

things that are somewhat relevant.

THE COURT:

25 26

Counsel, I'm not trying to put

pressure on you. MR. WARFEL:

I'm guessing -- let me say

there's no possible way starting at noon on Wednesday

that I can finish by next Thursday.

I know that for

sure.

THE COURT:

Okay.

All right.

So we're

going to recess now, and we'll resume tomorrow at 9

o'clock.

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Thank you both very much.

STATE OF CALIFORNIA )

COUNTY OF SAN DIEGO )

3 4 5

I, Diane Delaney-Dauphine, CSR 3612, do

hereby certify that I am an Official Shorthand Reporter

of the Superior Court, County of San Diego, State of

California;

That as such reporter, I reported in shorthand

the proceedings had on June 12, 2017, in the matter of

Hage vs. Gotmortgage.com. et al.,

That the foregoing transcript, consisting of

pages 1 through 65 inclusive, contains a partial, true,

and correct transcription of my shorthand notes of said

proceedings had at said hearing.

16 17

Dated at San Diego, California, this 18th day of June 2017.

18 19 20

____________________________________

DIANE DELANEY-DAUPHINE, CSR 3612

22 23 24 25 26 27 28

PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

3 4

I am employed in the county of Los Angeles, State of California. I am over the

age of 18 and not a party to the within action; my business address is: 234 E. Foothill

Blvd., Arcadia, CA 91006-2508.

7 8 9

On September 19, 2017, I served the foregoing document(s) described as on party(ies) and/or counsel(s) for the party(ies) in this action: ERRATA TO DECLARATION OF MARK WARFEL IN SUPPORT OF TARGET MORTGAGE, INC., AND NILDA MEG’S MOTION FOR NEW TRIAL

By causing such document(s) to be delivered to the office of the addressee(s) via e11

service to the party(ies) named by the court’s e-service on 9/8/17: 12 13 14 15 16 17 18 19

Grant, Miles Holland, Lori Kessler, Alexander Lesli Miller Lodovice, Barbara Lupo, Erin Meguerditchian, Desiree Rahil Swigart

miles@grantlawyers.com hollandl@higgslaw.com aj@grantlawyers.com millerl@higgslaw.com lodoviceb@higgslaw.com erin@grantlawyers.com foothill.lg@gmail.com swigart@higgslaw.com

via e-service agreement with SDSC

20 21 22

I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on September 19, 2017, at Arcadia, California.

23 24 25 26 27

_____________________________ MARK WARFEL

2 ERRATA TO DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL